United States: Amendments To The Limitation Act: Small Passenger Vessels Are Restricted From Limiting Their Liability For Marine Casualties

Limitation is an Ancient Legal Principle

The concept of allowing a shipowner to limit liability for marine casualties has existed in some form for seafaring nations since Roman times and was frequently utilized in the 16th and 17th centuries. Limitation of liability has been an important federal remedy and procedural vehicle in the United States for more than 170 years. Significantly, recent amendments to the statutory provisions eliminated the eligibility of owners of certain small passenger vessels to seek to limit liability for a marine casualty.¹ The amendments categorize a small passenger vessel as a vessel less than 100 gross tons (i) carrying no more than 49 passengers on an overnight domestic voyage or (ii) 150 passengers or less on an overnight non-domestic voyage. The amendments recodified the Limitation Act in 46 U.S.C. §§ 30521 – 30530.

The Basic Legal Framework of the Limitation Act

In 1851, Congress enacted the Limitation of Shipowners' Liability Act ("Limitation Act") for the underlying purpose to "encourage ship-building and to induce capitalists to invest money in this branch of industry."² There is a general consensus among legal scholars that the sinking of the Lexington in 1848, which caused substantial loss of life and destruction of cargo, motivated Congress to enact the Limitation Act to place the United States on equal footing with other maritime nations.³ The United States Supreme Court ignored the provisions of the contract of affreightment and held the shipowner of the Lexington liable for the loss of cargo specie.⁴

The Limitation Act grants only a shipowner—or a bareboat charterer (also known as a demise charterer)—the right to seek limitation and does not apply to either a time charterer or voyage charterer.⁵ Accordingly a shipowner—or bareboat charterer—without negligence, may either be exonerated from liability for a loss or alternatively allowed to limit its liability to third party claimants to a limitation fund equivalent to the post-casualty value of the vessel and the pending freight.⁶ The claims subject to limitation are defined within 46 U.S.C. § 30524. The Limitation Act does not allow a shipowner to limit liability for Coast Guard fines or oil pollution under The Oil Pollution Act of 1990, 33 U.S.C. §§ 2701 – 2761. 

Federal courts have exclusive jurisdiction to adjudicate claims under the Limitation Act. The benefit of a proceeding under the Limitation Act is to compel all claimants to assert their claims against the shipowner in a single federal court. The claimants comprise a concursus. Once a concursus is formed, the federal court issues a monition or injunction, prohibiting any other claimants from asserting their claims in another court arising out of the casualty. The procedure for actions under the Limitation Act are contained in Rule F of the Supplemental Rules for Admiralty or Maritime Claims and Asset Forfeiture Actions. 

Foreign-flagged vessels are entitled to file a petition seeking limitation in U.S. courts under certain circumstances. In 1881, the Supreme Court, in a landmark decision, held that a foreign vessel owner was entitled to seek limitation of liability in a United States court applying the Limitation Act.⁷ Among the shipowners who petitioned to limit their liability are the owners of the RMS Titanic. Although the vessel was flagged as a British ship, the United States Supreme Court held that the owners of the Titanic could limit their liability under the Limitation Act.⁸ Similarly, the owners of the SS Princess Sophia, where 364 people died, sought to limit their liability.⁹ And the SS Eastland, which capsized in the Chicago river and claimed at least 835 lives, is yet another example in which the owners sought to limit their liability.¹⁰

But after a fire on the SS Morro Castle claimed the lives of approximately 123 passengers and crew¹¹ on September 8, 1934, in which the owners sought to limit their liability to just $20,000, Congress amended the Limitation Act and enacted the Sirovich Amendments, which provided a Supplemental Fund for personal injury or death claims.¹² The Supplemental Fund applies only to seagoing vessels seeking to limit liability for personal injury or death claims.¹³

The pivotal factor in whether a shipowner is entitled to limit liability is whether the shipowner was negligent, or had privity or knowledge of the cause of the loss.¹⁴ This is a fact intensive two-step process and can be simplified as follows: (i) What negligent acts or conditions of unseaworthiness caused the accident? (ii) Did the vessel owner have knowledge or privity of those negligent acts or conditions of unseaworthiness that caused the accident?¹⁵

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Footnotes

1. 46 U.S.C. § 30502(b).

2. Lewis v. Lewis & Clark Marine, Inc. 531 U.S. 438 (2001), citing Norwich Co. v. Wright, 80 U.S. (13 Wall.) 104, 121 (1872).

3. Schoenbaum, T.J. Admiralty and Maritime Law, 6th ed., Vol. 2, §15.1, p. 186.

4. New Jersey Steam Navigation Co. v. Merchants Bank of Boston (LEXINGTON), 46 U.S. (6 Howe) 344 (1848).

5. 46 U.S.C. § 30501(2). For a clear and succinct explanation of the differences between these charters in a case involving the Limitation Act, see In re Tidewater Barge Lines, Inc., No. 03-CV-1225-ST, 2005 WL 3992463, at *6-7 (D. Or. Oct. 21, 2005).

6. 46 U.S.C. § 30523(a); see also Pickle v. Char Lee Seafood, Inc., 174 F.3d 444, 449 (4th Cir. 1999).

7. The Scotland, 105 U.S. (15 Otto) 24, 31 (1881).

8. Oceanic Steam Nav. Co. v. Mellor (THE TITANIC), 233 U.S. 718, 731-34 (1914).

9. The Princess Sophia, 61 F.2d 339, 355 (9th Cir. 1932), cert. denied, 288 U.S. 604 (1933).

10. The Eastland, 78 F.2d 984 (7th Cir. 1935), cert. den. 297 U.S. 703 (1935).

11. According to the presiding court, 81 passengers out of 318 were dead and missing and 34 crew members out of 231 were dead or missing. New York & Cuba Mail S.S. Co. v. Continental Ins Co. of City of New York, 32 F. Supp. 251, 255 (S.D.N.Y. 1940). However, on appeal, the Second Circuit noted that 89 passengers out of 316 were dead or missing, though the number of crew considered dead or missing was consistent with the lower court. 117 F.2d 404, 405 (2d Cir. 1941). Other courts have given conflicting numbers. One case cited legislative discussion that there were 124 deaths on the SS Morro Castle: In The Pocahontas, 20 F. Supp. 1004, 1009 (D. N.J. 1937). In later cases, the number of deaths have mysteriously increased. One case suggested that there were 135 deaths. U.S. v. S.S. Helena, 295 F. Supp. 610, 611 (E.D. La 1969). And the court in In re Bell suggested that there were 134 deaths. No. C12-1126JLR, 2014 WL 129642, at *3 (W.D. Wash. Jan 13, 2014). It is unclear why the numbers of fatalities on the Morro Castle have varied throughout the years.

12. In an admiralty case addressing the retroactivity of the Sirovich amendments, the district court of New Jersey quoted Representative Sirovich as stating, "'If my bill which is now being considered as passed, the Morro Castle victims, instead of having had only $20,000 against which the victims could sue, would have had at least $600,000 and $700,000.'" The Pocahontas, 20 F. Supp. 1004, 1009 (D. N.J. 1937).

13. See 46 U.S.C. § 30524.

14. See 46 U.S.C. § 30523(b).

15. See, e.g., In re BOWFIN M/V, 339 F.3d 1137 (9th Cir. 2003) (per curiam).

Originally published by Transportation Lawyers Association.

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